Venture Capital

Indicator 16: Venture Capital

How Does Massachusetts Perform?

Massachusetts’ average share of annual U.S. VC investment from 2006 to 2016 was 10.18%, ranging from around 8% to 12% annually. The Commonwealth’s VC investment increased to 9.89% of the U.S. total in 2016. California continued to be the number one destination for VC investment despite an 18% decrease from 2015-2016. The largest gain from 2015-2016 was in Rhode Island, which experienced a 75% increase in VC investment, from $12M to $21M. The Commonwealth continued to trail California in VC funding as a share of GDP, despite funding increasing from $12.16 to $12.20 per $1,000 GDP in 2016.

Healthcare and Internet were by far the largest target industries for VC funding in Massachusetts in 2016, representing 56.9% and 19.8% respectively, of total VC funding for the state. This reflects the Commonwealth’s strengths in these sectors as well as their broader appeal to investors. Although Venture Capital Investments in Massachusetts dropped by 7% ($6.7B to $6.2B) from 2015-2016, investment levels in the biopharmaceutical and biotech sector in Massachusetts continue to increase. Venture investment in biopharma companies in the state rose to $2.9B in 2016, a significant increase from the previous year. Massachusetts is also home to 7 “unicorn” companies (private companies with valuations above $1B) with 7 additional national unicorns companies having a presence in Boston.

Seed funding from VC firms in Massachusetts has increased by $175M from 2006 to 2016, rising to $200M. Early stage financing increased by $52M from 2015. Expansion financing increased by 73% from 2006 to 2016, the lowest percentage increase compared to other stages of financing. From 2015 to 2016, expansion financing dropped to $1.989B, a drop of $750M from 2015. Late stage financing is the largest category of VC funding in the state and has grown 268% since 2006. Apart from expansion financing by VC firms, VC investment at every stage peaked in 2016.